Banking stocks drive markets down

Thu, 10 Mar 11:30 am

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Indian stock markets continue to trade in the negative on account of selling pressure in heavy weights over the last two hours of trade. All the sectors are trading in the red led by banking and metals.

The BSE-Sensex is down by 150 points while NSE-Nifty is trading 45 points below the dotted line. BSE Midcap and BSE Small cap indices are trading flat at the moment. The rupee is trading at 45.08 to the US dollar.

Finance stocks are trading weak led by IFCI and RECL. As per a leading financial newspaper, India's leading housing finance company HDFC is likely to monetize some of its non-core investments in the next 6-12 months. This may result in a windfall gain of Rs 40 bn for the company. The non-core investments include HDFC's economic interests in business other than housing finance, banking, insurance and mutual fund. It may be noted that HDFC's list of listed investments includes companies like BHEL, Castrol India, L&T, Siemens and Tata Steel among others. HDFC has also invested Rs 3.6 bn in a few unlisted companies like ARCIL, CIBIL, IL&FS. The plan of selling non-core investments was disclosed by the company at a recent investor roadshow in the US. The company is also considering transferring all the investments in non-subsidiaries to facilitate value unlocking in non-core investments.

Speaking about the interest rate scenario, the management stated that they expected a tight liquidity situation with interest rates rising till April this year. However, HDFC will be able to offset the cost by a hike in lending rate and rise in spreads of corporate loans. The loan growth of HDFC is also expected to remain strong on account of demand for mortgages.

Steel stocks are trading mixed with Gujarat Mineral Development and SAIL trading firm and Adhunik Metaliks and Hindustan Zinc trading weak. As per a leading financial daily, Tata Steel plans to double the capacity of its Germany based automobile service centre by installing a new slitting line. This new line is expected to come up by 2012. The slitting line will have the capacity of 140,000 tonnes per annum (tpa). When it becomes operational, the capacity of Service Center Gelsenkirchen GmbH in Germany would increase from 225,000 tpa to 365,000 tpa. As of now the centre has a capacity of 155,000 tpa of slitting line and 70,000 tpa of cut-to-length capacity. It may be noted that a slitting line is used to break down master coils into smaller coils of a particular width. The end users such as automotive manufacturer, tube producers and others in similar sectors use the smaller coils for the production of precise finished goods. Slitting lines and cut-to-length are specialized services offered by Tata Steel especially for the automotive sector. It is believed that Tata Steel has earmarked an investment of EUR 8.6 m for the expansion of the Gelsenkirchen site.